Inflation is still weighing down Canada’s economy while the nation’s housing market remains in a rut, according to new research from The Conference Board of Canada.
“Higher mortgage rates have slowed residential demand and, unsurprisingly, the resale market has corrected with sales and prices decreasing,” said the organization in a press statement. “This downturn will frustrate some homeowners who bought at peak prices, while higher interest rates could severely impact some homeowners forced to renew mortgages at higher interest rates.”
The Conference Board of Canada repeated a previous forecast that predicted the nation’s real GDP growth “will be at a virtual standstill for the rest 2023. For the year as a whole that means a 0.9 per cent gain, followed by only a modest 1.4 per cent improvement in 2024.”
However, the tumult being experienced in the U.S. banking sector is not expected to permeate into Canada.
“Concerns about the U.S. financial system are unlikely to be mirrored in Canada given our country’s more concentrated banking system,” said Ted Mallett, director of economic forecasting at The Conference Board of Canada. “The indirect effects will be muted, and business investment was already expected to be weak in Canada so there is relatively little business lending to pull back.”
Mallett added that a post-pandemic Canadian economy is not ready to snap back into its pre-pandemic state.
“While much of the COVID-19 support spending is now in the rear-view mirror, governments continue to have a heightened presence in the economy,” he continued. “The pandemic brought about a new era of challenges to public finances, which were hardly looking rosy heading into the pandemic. The most notable question mark in today’s fiscal climate is how well governments can cope with new economic shocks.”